How to Screen a Tenant for Your Denver Rental House?
Hey, everybody. Matthew Whitaker back with Questions Owners Ask and today, we’re going to talk about how to screen a tenant for your Denver home (How to Screen a Tenant for Your Denver Rental House?).
So, again, my name is Matthew Whitaker, and we’re going to walk through how we screen a resident. And I hope this will be super helpful to you if you’re looking to screen your own resident.
Let’s Start With A Quick Kind Of Overview.
And I’ve been renting houses now for over 15 years.
I first got into business when I was 23 years old and bought my first house and fixed it up.
I personally went over and grabbed some of my younger brothers to go with me.
And we renovated this home ourselves. And it was great fun doing that with them. We moved a new tenant into it.
Again, 23 years old. Now, I’m a landlord. I’m feeling like I’m pretty awesome.
I did not screen the resident. And six months later, the resident stopped paying.
Now, there was some extenuating circumstances for why they stopped paying.
Some Of It Was A Little Bit Outside Of Their Control.
But at the end of the day, I had a resident in a house with nowhere to go, that wasn’t paying the rent.
And I really thought through kind of a lesson learned. Obviously, that was super painful at the time.
You know, being 23, never having to have evicted someone, and I didn’t honestly need to evict the person.
But, They Didn’t Pay Me For Like Three Months.
And it was, I would say, a disaster, especially for my first rental house. It’s kinda surprising, maybe I didn’t learn my lesson, that I’m still here so…
Now, We Rent Thousands Of Homes To People. We Sign Hundreds Of Leases Every Year.
And we follow these screening criteria so we think, just based on our experience, it’s something you should consider doing for your house. So let’s get into it.
First Thing, I Think It’s Important, And This Is Really A Step That Probably Gets Overlooked The Most…excuse Me, I’ve Got My Notes Right Down Here, Is The Credit Check.
One of the biggest challenges if you have…if this is your first, or second, or third rental home is you don’t have the ability to check credit.
So, one of the things we did is we went to TransUnion, and TransUnion is a partner of ours.
TransUnion had to send someone out to our office, make sure that we’re a legitimate company.
And we had to go through kind of some diligence process to be able to pull credit. But we’ve become…it’s pretty strenuous to get that ability to pull that credit.
You Have As A Private Landlord! (How to Screen a Tenant for Your Denver Rental House?)
So, one of the challenges you have as a private landlord is you don’t have the ability to pull credit.
Now, there may be some, sort of, something out there that I don’t know about, but a lot of people say, “Oh, credit doesn’t matter.”
But credit is specifically for this. It’s for tenants that…for people saying that, “Hey, I’m going to pay you something.”
They’re making a commitment to pay something, and it’s how well are they living up to their commitment.
And It’s A Score.
And it’s specifically for stuff like this.
So, I always think it’s funny when I hear other property managers say, “Oh, credit’s not that big of a deal.
You know, we don’t really use credit as a requirement. I’m like, “That’s so dumb because at it’s basic core is it’s them telling you how well they put up to the commitments that they made, which is exactly what they’re doing when they’re moving into a home.”
So first thing is credit check.
Second One Is Ability To Pay. And We Call Ability To Pay Essentially An Income. (How to Screen a Tenant for Your Denver Rental House?)
We really think it’s important that this person make enough income, and you actually have to screen this for people.
I’ve seen people that make, almost every month, the exact same amount of money that the rent is.
And it’s amazing to me that that person doesn’t have the concept that they can’t afford the house.
They Have The Right Amount!
So, you need to do a good job of making sure that they have the right amount of income to move into your home.
We look at typically three times.
There are some situations where we’ll go up to four times, especially if they have a mortgage somewhere else.
But what we call ability to pay is what I would say is the second thing.
The Third Thing I Would Say Is Checking Landlord References.
Now, I don’t know how important this is.
One of the things that we found as we dug into some of our data, we kind of did an audit of all of our underwriting.
And one of the things we found is that some of our worst tenants lived with friends and family. That’s who their landlord was.
So, what we found is it didn’t make sense, if I got booted out of my last place or had to leave owing a bunch of money, I’m not going to give you that landlord.
Just Became A Little Onerous!
And so trying to figure out who that landlord is and digging, you know, three or four years back in some cases, just became a little onerous, so we decided not to use it and to become more rigid, more strict, and more conservative with our other factors.
But a good place to do that is to check landlord references.
There are some people out there that still think it’s a great idea, and that’s one way that you can do it.
The Last Thing Is, And You’ve Got To Be Careful With This Because There’s Some New Laws Governing This, Is A Criminal Background Check. (How to Screen a Tenant for Your Denver Rental House?)
What I would say is you’ve got to be careful from a misdemeanor standpoint.
Violent felonies, obviously, you can disqualify for that as long as they were fairly recent.
There’s not like a good formula for this.
But what I would say is the last thing you want to do, and I’ve seen this, is someone to have a recent, violent felony, have just gotten out of, you know, jail for, you know, being in two or three years, and are wanting to move into our house.
Obviously, we were renting hundreds of houses so this doesn’t happen very frequently, but if you’re not able to pull a criminal background check, you know, that can be a problem.
So that’s it.
Those are the four things that I would do to screen a resident that was moving into my home.
I hope that was helpful.
My name’s Matthew Whitaker, and thanks for watching.